Iola officials will look into whether the city can end its agreement to purchase wholesale electricity from the Kansas Power Pool sooner than the two-year notice they recently provided the consortium.
Iola City Council members met Tuesday in a special session with Scott Shreve, the city’s energy consultant.
Shreve provided the council a breakdown of the city’s most recent bill from KPP. The wholesale energy is provided to the city to sell to its residents, commercial businesses and industries.
The council gave KPP a two-year notice in November that the city will opt out of its long-term contract, in large part because the power pool will no longer allow Iola to “peak shave” — that is, to generate electricity locally in order to reduce its demand for outside electricity in the summer months, when power demand is at its highest.
A city’s ability to reduce its peak demands should allow the city to receive more favorable rates from KPP, council members have argued.
The power pool, however, has noted that by allowing cities such as Iola to reduce demand — thus decreasing revenues — it places higher costs on cities that cannot generate their own electricity. And with a majority of KPP’s members non-producing municipalities, cities such as Iola are in the minority in terms of decision-making.
The impasse has led to several communities in Iola’s boat to announce their intention to leave KPP.
Council members said they were disturbed at recent actions by KPP, including a looming rate increase, plus a penalty for cities such as Iola that have declined to sign long-term agreements with the power pool.
The rate hike could cost the city as much as $565,000 annually. Taking away the city’s ability to peak shave could cost another $250,000 to $300,000, Shreve said.
“We’re talking about three-quarters of a million dollars,” he said.
Council members expressed concern over what they considered KPP’s “changing the rules” after the city signed its contract, first taking away the peak shaving capacity, then unilaterally announcing rate changes for cities intending to break away from the pool.
Shreve noted that the looming rate hike is not yet reality. There is the potential the KPP board changes its mind once it becomes clear how much revenue the power pool will lose when cities such as Iola leave.
COUNCIL MEMBERS also discussed the city’s next options in terms of wholesale electricity.
Shreve spelled out three in particular: by purchasing electricity on its own through Westar, the state’s largest utility provider; by reaching agreement with the Kansas Municipal Energy Association; and by grouping with other communities, such as Chanute through a diversified plan administered by Westar Emergency Management Services.
And there’s still the potential KPP develops a rate plan for energy-producing communities, Shreve said.
